Housing finance ticks up as new housing demand drives credit

In the earliest signs of a recovery in housing markets, lending for dwelling finance lifted in 0.9% in October to an annualised $18.214 billion as owner occupiers confirmed their market muscle, while the darlings of recent housing credit – first home buyers – continued their strong run.

The first chart shows the healthy rise in the total annualised value of loans (the green line) over the last three months. Though still below the heady peaks of late 2016, total dwelling finance is now trending up, supported by similar growth in the value of loans to owner-occupiers (up 5.7% over the year to $13.111 billion). Although the value of loans to investors is still down 9.7% on a year earlier, October confirmed they too had turned the corner, rising to $5.103 billion on an annualised basis.


To go straight to the dashboard and take a closer look at the data, click here.

We reserve greatest regard for first home buyers, the value of loans to whom increased 18.5% over the year to $3.620 billion. Our regard is not pure nostalgia, it is a fact that almost universally, first home buyers are forming new households, providing the critical ingredient for natural growth in housing demand. It is they alone (whether migrants, young couples or permanent singles) whose borrowings add new dwelling demand in the economy.

The first chart shows that though relatively small, their monthly contribution to borrowings has been consistent over the last three months. Despite that, the second chart shows that as a proportion of all loans (the red line), first home buyers saw their share dip in October, accounting for 19.9% of all loans by value, down from 20.1% the prior month. Strong though their role has been and remains, existing owner-occupiers dug just a little deeper and took on a margin more debt.


To go straight to the dashboard and take a closer look at the data, click here.

The astute will note that there appears to be something of an inverse relationship between the share of finance held by first home buyers and the total loan portfolio. Most of the long run of growth in their share came as total lending declined: first home buyers were doing relatively better. It is therefore unsurprising that as total loan value has risen, there has come a point where first home buyers have struggled to maintain their share.

On that note, we can observe in the next chart that the dip in first home buyer’s share of total loan value comes exactly when lending returned to growth on a value basis. 


To go straight to the dashboard and take a closer look at the data, click here.

The value of annualised housing finance might only be up 0.9% on a year earlier, but that lift is welcome, the trend continues to be up and comes courtesy of the number of loans, as well as rising loan value.

Finally, it is also pleasing, though a little patchy, to see the value of loans for alterations and additions lifting to an eleven month high in October. Loan values (shown below on the red line on the right hand side) totalled $267 million for the month, recording a solid lift of 11.2% on the prior month. 

The trend is not yet confirmed for alterations and additions, but it is heading in the right direction for the first time in more than two years.


To go straight to the dashboard and take a closer look at the data, click here.

When we examine lending for dwellings, we often get an early indication of future building works entering the pipeline. It is reasonable to anticipate that 2020 will see more building activity. The gentle caution is that we will also see more transactions of existing dwellings.

The green shoots of housing growth are popping up right now!